A Guide to Corporate Taxes in Spain

If a company has been incorporated under Spanish law and has its registered office in the country, then it is considered a resident in Spain for tax purposes and must pay Spanish taxes on all worldwide income.

In this article, we’ll provide an overview of the main taxes to be aware of for companies in Spain.

What is Corporate Tax?

Corporate tax (Impuesto de Sociedades) is the company equivalent to IRPF, which is the personal income tax paid by individuals in Spain - including people in full-time employment and those who are self-employed (autónomos).

There are two categories of national taxes that a company is required to pay. These are direct taxes and indirect taxes, which we’ll dive into below.

For more information on IRPF for autónomos, see our article Registering as a Freelancer in Spain.

Direct Taxes

This category refers to corporate taxation, which is set at a flat rate of 25% of profits. However, in certain cases, lower rates can be applied. For example, newly established companies that are conducting business activity and achieve profit will pay 15% for the first two fiscal years.

Indeed the tax rate does also depend on the type of business structure and its activity. For-profit companies will pay between 15 - 30%, non-profits or cooperatives must pay 20% and foundations or associations are liable for 10% tax.

There are also opportunities to reduce corporate tax, for instance, if your business invests in technological innovation, or employs certain worker profiles.

Corporate tax is due on the final day of the tax period and payment can be made a maximum of six months and 25 days after the end of the company tax year. Generally, this is the end of the calendar year but companies can select their own fiscal year, as long as it does not exceed 12 months. The tax return is submitted via form 200.

Before payment is made, the due tax must be calculated by making accounting adjustments to profits listed in the company’s annual income statement. This will then be subject to any compensation for tax losses and deductions before arriving at the final amount.

A detailed breakdown of factors affecting actual tax paid is available from the Agencia Tributaria.

Indirect Taxes

Indirect tax refers to VAT (IVA), which will need to be paid on the taxable goods and services offered by a company.

The general rate of VAT is 21%, with reductions possible for certain products and services. For example, 10% VAT is payable on health products or services like hotel stays. A 4% rate is applied to basic items like food or books. And a VAT exemption is made for the postal service.

Records should be kept for all issued invoices, received invoices to deduct VAT paid, capital goods purchased, and intra-community transactions - which means those made outside of Spain but still within the EU and that are subject to the VAT Information Exchange System (VIES).

VAT returns must be completed monthly or quarterly (via form 303), depending on the level of income, and an annual return will also need submitting (via form 390).

The VAT declaration needs to be made on all sales during the period, plus any purchases where the VAT can be offset against the amount of VAT received from sales to reduce the payment due.

Special Tax Regimes

If you are a multinational company looking to expand into Spain or are considering starting a business in the country, you may be interested in the Canary Islands Special Zone (ZEC). This is a low tax zone that was created to diversify production within the region and to promote economic and social development.

Companies within the ZEC are subject to Spanish corporate tax at the special rate of 4% on a proportion of their profit. The reduced rate applies to a maximum amount of taxable income, depending on the number of jobs created.

You’re Not Alone

If you need help determining which taxes your company in Spain needs to pay, or how to go about setting up a company in Spanish territory, then one of our specialist business lawyers at Strong Abogados is here to help.

Contact the team below with your enquiry and we’ll be happy to assist.

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